The Contract Loophole

Many hockey bloggers seem more interested in the running of the hockey business than the game itself. I usually stick to the hockey, and Bruins hockey at that. But from time to time there are some "business" issues that affect the game itself.

I am sure most fans have heard about the recent rejection of Ilya Kovalchuk’s 17-year, $102 million contract with New Jersey. I have read numerous stories on the subject. Most look at the mechanics of the so-called "loophole" used by New Jersey or at owners vs. players association politics. Many look at the possible consequences for similar contracts. But nobody seems interested in the larger picture. The question I would pose is this: are these "loophole" contracts good or bad for the NHL from the fans perspective.

First let's understand the issue. As I understand it some elite players are being offered unusually long term contracts where the salary drops to near league minimum for the years near the end, usually around the time the player has turned 40. The rules set out in the CBA compute the team's salary cap hit as a yearly average for these contracts. By extending them into "old age" at a lower pay the yearly cap hit goes down, allowing the team to supposedly circumvent the salary cap. This has almost universally been called a loophole.

In truth the NHL has little to hang their claim on that this is a circumvention of the salary cap. If the case were to go to a court of law (which it will not) I doubt the NHL would win. The GMs are simply playing by the rules of the game as set out in the CBA. If the NHL does not like it they should change the rules rather than reject contracts on what is clearly a highly subjective basis. After all, where do you draw the line? Kovalchuk’s contract is merely the most extreme example. Under the current rules there is no clear line for the GMs not to cross; there is no cut and dried way to determine which contracts circumvent the CBA and which don't. There has been a lot of talk about Savard's contract, but even Tim Thomas' contract could be viewed as a less in-the-face version of the same loophole. In my opinion the NHL has opened a can of worms. League officials have to look at each contract and decide, rather subjectively, which ones are to be rejected. Throw in the fact that some of these contracts are being looked at retrospectively and you have a highly ridiculous situation that is sure to make some teams and fans feel that they have been unreasonably singled out. This is bound to lead to acrimony and further embarrassment for the league.

But back to my question. Forget about all the politics and claims of subverting the idea behind the salary cap. What are the pros and cons of this type of contract from the perspective of the fans?

One thing the salary cap has done is to force teams to use more young (read cheap) talent on their teams. This has made it easier for young players to break into the NHL and to break into the league earlier than before. On the other hand it has made it more difficult for established "stars" to find large salaries in free agency. Typically each team now has 1-4 highly paid players. The rest of the team's salary is divided among mid-level and entry-level contracts. This puts pressure on GMs to "dump salary" by trading or walking away from their star players to make room for the inexpensive up and comers. The end result from the players point of view is likely to be shorter careers, particularly for the more lucrative period. That and they will likely end up playing for many different teams. We have seen a phenomenon of "revolving stars" and more long term "rental players" in recent years. Just look at the Montreal roster. It's dominated by a bunch of hired guns. Where is their storied history now? Is this really good for the game?

For the fans the salary cap means that their stars--their so-called franchise players--are more likely to be traded away or not re-signed than in previous generations. That is, except for these "loophole" contracts. The players sign these contracts because it guarantees them some measure of job security as they age and the possibility of being one day remembered as one of the teams "greats" because they played most of their career for the same team. For this same reason I too see these contracts as a good thing. I don't want my Bruins to end up like Montreal with a bunch of free agents with no ties to the organization and who are likely to be gone in a year or two. I wrote about that in my last blog. As a fan of the team for almost forty years, rather than a Bostonian who just wants to party over a cup win, I would find a cup victory like last year's in Chicago to be empty.

For these reasons I hope the NHL resolves the issue of this "loophole" in way that continues to allow star players to sign contracts that will keep them with their teams into their declining years. Otherwise in a decade we may wonder why numbers are no longer lifted to the rafters.